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Timberlake Company owns equipment with a cost of $165,000 and accumulated depreciation of $60,000 that can...

Timberlake Company owns equipment with a cost of $165,000 and accumulated depreciation of $60,000 that can be sold for $82,000, less a 6% sales commission. Alternatively, the equipment can be leased by Timberlake Company for five years for a total of $84,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Timberlake Company on the equipment would total $7,950 over the five years. Prepare a differential analysis on March 23, as to whether Timberlake Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

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Answer #1

Prepare a differential analysis on March 23, as to whether Timberlake Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

Sell Lease
Revenue 82000 84600
Expense -4920 -7950
Income (loss) 77080 76650

Company should sell the equipment

1 1
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